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House Passes Dodd-Frank Reform Minus Interchange Reform

The Financial CHOICE Act of 2017 (HR 10), legislation to overhaul the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, was approved along party lines by the U.S. House of Representatives 233-186 on June 8. The legislation focuses on ending big-bank bailouts and supporters say it provides more accountability for Washington and Wall Street, while removing barriers to economic growth.

Eliminating interchange reform was part of the original HR 10, reintroduced in April by House Financial Services Committee Chairman Jeb Hensarling (R-Texas). But Republican leaders removed the bill’s repeal of interchange reform for fear they wouldn’t be able to garner enough votes to pass HR 10 in the full House.

The Financial CHOICE Act removes the Financial Stability Oversight Council’s authority to designate nonbank financial institutions and financial market utilities as systemically important, or “too big to fail.” Such entities currently are subject to additional regulatory restrictions. The bill also prohibits the use of the Exchange Stabilization Fund, an emergency reserve fund of the U.S. Treasury, to bailout financial firms and creditors. The bill would create a chapter of the bankruptcy code to accommodate the failure of large, complex financial institutions.

“We will end bank bailouts once and for all [and] we will replace bailouts with bankruptcy,” Rep. Hensarling said in a June 8 statement. “We will replace economic stagnation with a growing, healthy economy,” he added. The Congressional Budget Office reports the bill would reduce the deficit by $33.6 billion over 10 years and that the bill’s regulatory relief would benefit community banks and credit unions, according to Hensarling. The Financial CHOICE Act also includes “the toughest penalties in history” for those who commit financial fraud and insider trading,” he added.

CFPB Changes

The bill includes sweeping changes to the responsibilities of the CFPB—its new name being the Consumer Law Enforcement Agency—such as giving it a dual mission of consumer protection and promoting competitive markets as well as requiring the agency to obtain permission before collecting consumers’ personally identifiable information. The agency also would be subject to the congressional appropriations process and the bill would establish an independent, Senate-confirmed inspector general to oversee the CFPB. Furthermore, the legislation calls for the agency to be led by a single director removable by the president at will.

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